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MSC Industrial Direct Co. Inc.$73.99$2.884.05%

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 MSC Reports Fiscal 2017 Fourth Quarter And Full Year Results
   Tuesday, October 31, 2017 6:45:00 AM ET

FISCAL Q4 2017 HIGHLIGHTS

-- Completed acquisition of DECO Tool Supply Co. on July 31, 2017

-- Net sales of $753.8 million, an increase of 1.2% year-over-year

-- Average daily sales (ADS) increased 9.2% year-over-year, with 150 basis points of growth from DECO

-- Operating margin of 13.3%, flat with the prior year and negatively impacted by 20 basis points from DECO

-- Diluted EPS of $1.07, versus the prior year of $1.02

FISCAL 2017 HIGHLIGHTS

-- Net sales of $2.9 billion, an increase of 0.8% year-over-year (3.2% increase on an ADS basis)

-- Operating margin of 13.1%, flat with prior year

-- Diluted EPS of $4.05, versus the prior year of $3.77

https://mma.prnewswire.com/media/593597/MSC_Logo.jpg

MSC INDUSTRIAL SUPPLY CO. (MSM ), "MSC" or the "Company," a premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") products and services to industrial customers throughout North America, today reported financial results for its fiscal 2017 fourth quarter and full year ended September 2, 2017. Both periods included one less week of operational results as compared to the prior periods.

Financial Highlights1  FY17 Q4             FY16 Q4             Change             FY17                FY16                Change
Net Sales              $753.8              $745.1              1.2%               $2,887.7            $2,863.5            0.8%
Operating Income       100.0               99.2                0.8%               379.0               376.0               0.8%
% of Net Sales         13.3%               13.3%                                  13.1%               13.1%
Net Income             60.7                61.8                (1.8%)             231.4               231.2               0.1%
Diluted EPS            $1.07             2 $1.02             3 4.9%               4.05              2 3.77              3 7.4%
1In millions unless noted. 2Based on 56.8 million and 57.0 million diluted shares outstanding for FY17 Q4 and FY17, respectively. 3 Based on 60.3 and 61.1 million diluted shares outstanding for FY16 Q4 and FY16, respectively.

Erik Gershwind, president and chief executive officer, said, "Conditions steadily improved in the quarter as manufacturing continued to firm. MSC achieved sales growth across all customer types with particular strength in National Accounts and CCSG. This momentum continued into the first two months of fiscal 2018."

Rustom Jilla, executive vice president and chief financial officer, added, "Our reported average daily sales rose 9.2%, gross margin was 44.2%, operating margin was 13.3%, and EPS rose by 5 cents. Organic top and bottom line results in our fourth quarter were well above prior year and guidance. We also completed the acquisition of DECO Tool Supply Co., our first acquisition in four years. Excluding DECO, our quarterly average daily sales rose 7.7 percent, our gross margin was 44.6%, we continued to leverage our expenses, and we grew our operating margin to 13.5%*. We also had a strong quarter in terms of cash flow generation, which enabled us to maintain leverage at 1.1 times, even after acquiring DECO and buying back shares."

Gershwind concluded, "For the past several years, we have executed our strategic plan in the face of difficult market conditions. As the environment turned in 2017, we began to see the fruits of this work and enjoyed our first year of significant earnings growth since 2012. Looking forward, we expect to continue growing earnings and expanding operating margins, particularly if the early signs of price inflation materialize in 2018."

* An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in schedules following this press release

Outlook Based on current market conditions, the Company expects net sales for the first quarter of fiscal 2018 to be between $762 million and $776 million. At the midpoint, average daily sales are expected to increase roughly 12% compared to last year’s first quarter. Excluding DECO, the Company expects net sales for the first quarter of fiscal 2018 to be between $734 million and $748 million, with average daily sales at the midpoint expected to increase roughly 8% compared to last year’s first quarter. The Company expects diluted earnings per share for the first quarter of fiscal 2018, including and excluding DECO, to be between $1.03 and $1.07, at the midpoint up roughly 9% compared to last year’s first quarter.

Conference Call Information

MSC will host a conference call today at 8:30 a.m. EST to review the Company’s fiscal 2017 fourth quarter and full year results. The call, accompanying slides, and other operational statistics may be accessed at: http://investor.mscdirect.com . The conference call may also be accessed at 1-877-443-5575 (U.S.), 1-855-669-9657 (Canada) or 1-412-902-6618 (international).

An online archive of the broadcast will be available until November 7, 2017.

The Company’s reporting date for fiscal first quarter 2018 is scheduled for January 10, 2018.

About MSC Industrial Supply Co. MSC Industrial Supply Co. (MSM ) is a leading North American distributor of metalworking and maintenance, repair, and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with more than 1.5 million products, inventory management and other supply chain solutions, and deep expertise from over 75 years of working with customers across industries.

Our experienced team of more than 6,500 associates is dedicated to working side by side with our customers to help drive results for their businesses - from keeping operations running efficiently today to continuously rethinking, retooling, and optimizing for a more productive tomorrow.

For more information on MSC, please visit mscdirect.com.

Note Regarding Forward-Looking Statements: Statements in this Press Release may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about expected future results, expected benefits from our investment and strategic plans, and expected future margins, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this release does not constitute an admission by MSC or any other person that the events or circumstances described in such statement are material. Factors that could cause actual results to differ materially from those in forward-looking statements include: general economic conditions in the markets in which we operate, worldwide economic, social, political, and regulatory conditions, including conditions that may result from legislative, regulatory and policy changes, changing customer and product mixes, competition, including the adoption by competitors of aggressive pricing strategies and sales methods, industry consolidation, volatility in commodity and energy prices, credit risk of our customers, risk of cancellation or rescheduling of orders, work stoppages or other business interruptions (including those due to extreme weather conditions) at transportation centers or shipping ports, financial restrictions on outstanding borrowings, dependence on our information systems and the risk of business disruptions arising from changes to our information systems, disruptions due to computer system or network failures, computer viruses, physical or electronics break-ins and cyber-attacks, the loss of key suppliers or supply chain disruptions, problems with successfully integrating acquired operations, opening or expanding our customer fulfillment centers exposes us to risks of delays, the risk of war, terrorism and similar hostilities, dependence on key personnel, goodwill and intangible assets recorded as a result of our acquisitions could be impaired, and the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits. Additional information concerning these and other risks is described under "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the reports on Forms 10-K and 10-Q that we file with the U.S. Securities and Exchange Commission. We assume no obligation to update any of these forward-looking statements.

MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
                                                            September 2,       September 3,
                                                            2017               2016
ASSETS
Current Assets:
Cash and cash equivalents                                   $       16,083     $       52,890
Accounts receivable, net of allowance for doubtful accounts         471,795            392,463
Inventories                                                         464,959            444,221
Prepaid expenses and other current assets                           52,742             45,290
Deferred income taxes                                               --                 46,627
Total current assets                                                1,005,579          981,491
Property, plant and equipment, net                                  316,305            320,544
Goodwill                                                            633,728            624,081
Identifiable intangibles, net                                       110,429            105,307
Other assets                                                        32,871             33,528
Total assets                                                $       2,098,912  $       2,064,951
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt                                             $       331,986    $       267,050
Accounts payable                                                    121,266            110,601
Accrued liabilities                                                 104,473            100,951
Total current liabilities                                           557,725            478,602
Long-term debt                                                      200,991            339,772
Deferred income taxes and tax uncertainties                         115,056            148,201
Total liabilities                                                   873,772            966,575
Commitments and Contingencies
Shareholders’ Equity:
Preferred Stock                                                     --                 --
Class A common stock                                                54                 53
Class B common stock                                                12                 12
Additional paid-in capital                                          626,995            584,017
Retained earnings                                                   1,168,812          1,040,148
Accumulated other comprehensive loss                                (17,263)           (19,098)
Class A treasury stock, at cost                                     (553,470)          (506,756)
Total shareholders’ equity                                          1,225,140          1,098,376
Total liabilities and shareholders’ equity                  $       2,098,912  $       2,064,951
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share data)
                                                         (Unaudited)
                                                         Quarters Ended                  Fiscal Years Ended
                                                         September 2,    September 3,    September 2,      September 3,
                                                         2017            2016            2017              2016
                                                         (13 weeks)      (14 weeks)      (52 weeks)        (53 weeks)
Net sales                                                $      753,770  $      745,074  $      2,887,744  $      2,863,505
Cost of goods sold                                              420,320         411,007         1,601,497         1,574,647
Gross profit                                                    333,450         334,067         1,286,247         1,288,858
Operating expenses                                              233,471         234,821         907,247           912,898
Income from operations                                          99,979          99,246          379,000           375,960
Other income (expense):
Interest expense                                                (3,125)         (1,752)         (12,370)          (5,807)
Interest income                                                 162             163             658               654
Other income (expense), net                                     1,044           12              704               924
Total other expense                                             (1,919)         (1,577)         (11,008)          (4,229)
Income before provision for income taxes                        98,060          97,669          367,992           371,731
Provision for income taxes                                      37,312          35,823          136,561           140,515
Net income                                               $      60,748   $      61,846   $      231,431    $      231,216
Per Share Information:
Net income per common share:
Basic                                                    $      1.07     $      1.03     $      4.08       $      3.78
Diluted                                                  $      1.07     $      1.02     $      4.05       $      3.77
Weighted average shares used in computing net income per
common share:
Basic                                                           56,585          60,079          56,591            60,908
Diluted                                                         56,801          60,278          56,971            61,076
Cash dividends declared per common share                 $      0.45     $      0.43     $      1.80       $      1.72
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
                                         Fiscal Years Ended
                                         September 2,     September 3,
                                         2017             2016
                                         (52 weeks)       (53 weeks)
Net income, as reported                  $       231,431  $       231,216
Foreign currency translation adjustments         1,835            (1,846)
Comprehensive income                     $       233,266  $       229,370
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
                                                                                            Fiscal Years Ended
                                                                                            September 2,       September 3,
                                                                                            2017               2016
                                                                                            (52 weeks)         (53 weeks)
Cash Flows from Operating Activities:
Net income                                                                                  $       231,431    $       231,216
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization                                                                       62,980             71,930
Stock-based compensation                                                                            13,925             13,985
Loss on disposal of property, plant, and equipment                                                  678                752
Provision for doubtful accounts                                                                     7,048              6,997
Deferred income taxes and tax uncertainties                                                         13,482             15,007
Excess tax benefits from stock-based compensation                                                   --                 (1,536)
Write-off of deferred financing costs on previous credit facility                                   94                 --
Changes in operating assets and liabilities, net of amounts associated
with business acquired:
Accounts receivable                                                                                 (72,230)           2,595
Inventories                                                                                         (15,871)           61,047
Prepaid expenses and other current assets                                                           (7,428)            (6,303)
Other assets                                                                                        548                142
Accounts payable and accrued liabilities                                                            12,184             5,271
Total adjustments                                                                                   15,410             169,887
Net cash provided by operating activities                                                           246,841            401,103
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment                                                      (46,548)           (87,930)
Cash used in business acquisition                                                                   (42,345)           --
Net cash used in investing activities                                                               (88,893)           (87,930)
Cash Flows from Financing Activities:
Repurchases of common stock                                                                         (49,182)           (383,798)
Payments of cash dividends                                                                          (102,216)          (105,778)
Payments on capital lease and financing obligations                                                 (1,175)            (1,090)
Excess tax benefits from stock-based compensation                                                   --                 1,536
Proceeds from sale of Class A common stock in connection with associate stock purchase plan         4,243              4,084
Proceeds from exercise of Class A common stock options                                              26,887             7,410
Borrowings under financing obligations                                                              739                453
Borrowings under Credit Facility                                                                    546,000            305,000
Proceeds from Private Placement Loan                                                                --                 175,000
Private Placement Loan financing costs                                                              --                 (185)
Credit Facility financing costs                                                                     (1,542)            --
Payments of notes payable and revolving credit note under the Credit Facility                       (618,500)          (301,000)
Net cash used in financing activities                                                               (194,746)          (298,368)
Effect of foreign exchange rate changes on cash and cash equivalents                                (9)                (182)
Net increase (decrease) in cash and cash equivalents                                                (36,807)           14,623
Cash and cash equivalents - beginning of year                                                       52,890             38,267
Cash and cash equivalents - end of year                                                     $       16,083     $       52,890
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes                                                                  $       121,691    $       127,965
Cash paid for interest                                                                      $       11,695     $       4,986

Non-GAAP Financial Measures MSC Reported excluding DECO Tool Supply Co To supplement MSC’s unaudited selected financial data presented consistent with Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures that exclude the results of our acquisition of DECO Tool Supply Co. ("DECO") on July 31, 2017, including non-GAAP net sales, non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP diluted earnings per share. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect MSC’s results of operations as determined in accordance with GAAP, and that these measures should only be used to evaluate MSC’s results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of the Company’s performance.

In calculating non-GAAP financial measures, we exclude the results of DECO to facilitate a review of the comparability of the Company’s operating performance on a period-to-period basis. We use non-GAAP measures to evaluate the operating performance of our business (excluding DECO), for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

-- the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

-- the ability to better identify trends in the Company’s underlying business and perform related trend analyses;

-- a better understanding of how management plans and measures the Company’s underlying business; and

-- an easier way to compare the Company’s operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures

MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Information
Thirteen Weeks and Year Ended September 2, 2017
(dollars in thousands, except per share data)
GAAP Measure                      Items Affecting               Non-GAAP Measure
                                  Comparability
Net Sales                         DECO Tool Supply Co.          Net Sales, excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,
2017            2017              2017           2017           2017            2017
$      753,770  $      2,887,744  $      10,369  $      10,369  $      743,401  $      2,877,375
GAAP Measure                      Items Affecting               Non-GAAP Measure                  GAAP Measure               Non-GAAP Measure
                                  Comparability
Gross Profit                      DECO Tool Supply Co.          Gross Profit,                     Gross Margin               Gross Margin,
                                                                excluding DECO                                               excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year              Thirteen     Year          Thirteen     Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended             Weeks Ended  Ended         Weeks Ended  Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,      September 2, September 2,  September 2, September 2,
2017            2017              2017           2017           2017            2017              2017         2017          2017         2017
$      333,450  $      1,286,247  $      1,900   $      1,900   $      331,550  $      1,284,347  44.2   %     44.5   %      44.6   %     44.6   %
GAAP Measure                      Items Affecting               Non-GAAP Measure
                                  Comparability
Operating Expenses                DECO Tool Supply Co.          Operating Expenses,
                                                                excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,
2017            2017              2017           2017           2017            2017
$      233,471  $      907,247    $      2,059   $      2,059   $      231,412  $      905,188
GAAP Measure                      Items Affecting               Non-GAAP Measure                  GAAP Measure               Non-GAAP Measure
                                  Comparability
Operating Income (Loss)           DECO Tool Supply Co.          Operating Income (Loss),          Operating Margin           Operating Margin,
                                                                excluding DECO                                               excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year              Thirteen     Year          Thirteen     Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended             Weeks Ended  Ended         Weeks Ended  Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,      September 2, September 2,  September 2, September 2,
2017            2017              2017           2017           2017            2017              2017         2017          2017         2017
$      99,979   $      379,000    $      (159)   $      (159)   $      100,138  $      379,159    13.3   %     13.1   %      13.5   %     13.2   %
GAAP Measure                      Items Affecting               Non-GAAP Measure
                                  Comparability
Net Income (Loss)                 DECO Tool Supply Co.          Net Income (Loss),
                                                                excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,
2017            2017              2017           2017           2017            2017
$      60,748   $      231,431    $      (157)   $      (157)   $      60,905   $      231,588
GAAP Measure                      Items Affecting               Non-GAAP Measure
                                  Comparability
Diluted Earnings Per Share        DECO Tool Supply Co.          Diluted Earnings Per Share,
                                                                excluding DECO
Thirteen        Year              Thirteen       Year           Thirteen        Year
Weeks Ended     Ended             Weeks Ended    Ended          Weeks Ended     Ended
September 2,    September 2,      September 2,   September 2,   September 2,    September 2,
2017            2017              2017           2017           2017            2017
$      1.07     $      4.05       $      -       $      -       $      1.07     $      4.05
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Information
Guidance for Thirteen Weeks Ended December 2, 2017*
(dollars in millions, except per share data)
GAAP Measure                 Items Affecting        Non-GAAP Measure
                             Comparability
Net Sales                    DECO Tool Supply Co    Net Sales,
                                                    excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017
$             769.0          $          27.8        $             741.2
GAAP Measure                 Items Affecting        Non-GAAP Measure             GAAP Measure            Non-GAAP Measure
                             Comparability
Gross Profit                 DECO Tool Supply Co    Gross Profit,                Gross Margin            Gross Margin,
                                                    excluding DECO                                       excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended         Thirteen Weeks Ended    Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017             December 2, 2017        December 2, 2017
$             335.1          $          6.0         $             329.1          43.6                 %  44.4                 %
GAAP Measure                 Items Affecting        Non-GAAP Measure
                             Comparability
Operating Expenses           DECO Tool Supply Co    Operating Expenses,
                                                    excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017
$             235.3          $          5.8         $             229.5
GAAP Measure                 Items Affecting        Non-GAAP Measure             GAAP Measure            Non-GAAP Measure
                             Comparability
Operating Income             DECO Tool Supply Co    Operating Income,            Operating Margin        Operating Margin,
                                                    excluding DECO                                       excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended         Thirteen Weeks Ended    Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017             December 2, 2017        December 2, 2017
$             99.7           $          0.1         $             99.6           13.0                 %  13.4                 %
GAAP Measure                 Items Affecting        Non-GAAP Measure
                             Comparability
Net Income (Loss)            DECO Tool Supply Co    Net Income (Loss),
                                                    excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017
$             59.7           $          (0.1)       $             59.8
GAAP Measure                 Items Affecting        Non-GAAP Measure
                             Comparability
Diluted Earnings Per Share   DECO Tool Supply Co    Diluted Earnings Per Share,
                                                    excluding DECO
Thirteen Weeks Ended         Thirteen Weeks Ended   Thirteen Weeks Ended
December 2, 2017             December 2, 2017       December 2, 2017
$             1.05           $          -           $             1.05
*  The data in the above tables represent the midpoint of management’s guidance; see note regarding forward-looking statements

View original content with multimedia:http://www.prnewswire.com/news-releases/msc-reports-fiscal-2017-fourth-quarter-and-full-year-results-300546126.html

SOURCE MSC Industrial Supply Co.

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